Potential Problems With

Potential Problems With - Potential Problems With Moving...

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1 þ Increasing n smooths the forecast but makes it less sensitive to changes þ Do not forecast trends well þ Require extensive historical data Potential Problems With Moving Average
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2 þ Form of weighted moving average þ Requires smoothing constant ( α ) þ Ranges from 0 to 1 þ Subjectively chosen þ Involves little record keeping of past data Exponential Smoothing
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3 Exponential Smoothing last period’s forecast + α ( last period’s actual demand – last period’s forecast ) Ft = Ft – 1 + α ( At – 1 - Ft – 1) where Ft = new forecast Ft – 1 = previous forecast α = smoothing (or weighting) constant (0  α  1)
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4 Exponential Smoothing Example Last period Forecast = 142 Ford Mustangs Last Period Actual demand = 153 Smoothing constant α = .20
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5 Exponential Smoothing Example
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Potential Problems With - Potential Problems With Moving...

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